Franchising a Consultancy

By Lin Grensing-Pophal Jun 27, 2011

Alan Weiss, Ph.D., began his global mentor program 15 years ago, but began franchising it in January 2011. So far, two dozen people have paid him between $10,000 and $14,000 for the chance to deliver his brand of HR services.

“I’m aiming for 100 by 2015, so I’m ahead of schedule,” said Weiss, president of Summit Consulting Group, based in East Greenwich, R.I.

While he doesn’t represent the norm when it comes to consulting success, he said he’s well into the seven-figure spectrum.

The concept of franchising or licensing HR consulting practices is not outside the realm of possibility—even for average HR consultants, experts say.

Brian Miller is president and COO of The Entrepreneur’s Source (TES) in Southbury, Conn., a firm that helps organizations franchise successfully. He said consultants considering franchising should first ask themselves: Is my business something that others can learn to operate for themselves?

“Your business model should lend itself to being easily duplicable in other locations,” he said. And, he added, the practice should have a significant competitive advantage over others.

Success, Small and Large

Allison O’Kelly is founder and CEO of Mom Corps, a national flexible staffing and search firm. “We launched our franchising arm in 2009 and within the first year opened 12 new franchises in major metropolitan markets throughout the U.S., including Atlanta, Philadelphia, Miami, Charlotte, Cincinnati, Virginia, Seattle, Austin, New York City and Boston,” said O’Kelly. “Franchising allowed Mom Corps to service more clients and more candidates than ever before—propelling our business from $2 million in sales in 2009 to a projected $10 million in 2011.”

That’s the kind of success that many HR consultants would like to emulate. But, of course, not all consultancies are replicable.

“Right now the hot areas in franchising are what have come to be called low investment franchises,” said Joel Buckberg, an attorney with Baker, Donelson, Bearman, Caldwell & Berkowitz in Nashville. These “virtual franchises” are easily replicated because the franchisor has taught and trained the franchisee to operate the business. HR consultancies fit perfectly into this category, he noted, but consultants should proceed cautiously because these types of businesses traditionally depend on personal contacts and relationships—elements that are much more difficult to franchise.

“The wisdom you read in most materials and get from most people in the industry is that if you can duplicate your location with someone you hire who you think has the talent to operate the business and your second location is as successful as the first … then you have a business that can be duplicated.”

In the HR realm of franchising consultancies, Buckberg said “one of the genres that is seeing some traction is executive coaching.” However, “franchising is not for the faint of heart. It is not as complex as the mythology, but it’s not as simple as hanging out a shingle and saying ‘I’m in business.’ ”

Something to Sell

The key to success in franchising is, of course, having something of value to sell that others will be interested in. For example, a successful coaching franchise would include a database of clients and products such as webinars, videos and seminars and the business’ reputation, experts say.

Those purchasing a franchise will want to think they’re getting their money’s worth—long after they’ve bought in on the business.

“At some point every franchisee wakes up writing a check and says, ‘What do I need them for?’ You have to deliver on a value proposition that makes the value of what the franchisor provides to the franchisee greater than the cost they incur for that service and less than the cost that they would incur to duplicate the service,” Buckberg said.

Tips for Success

O’Kelly offered a number of tips for HR consultants hoping to achieve success through franchising:

Surround yourself with franchising experts—franchise attorney, franchise sales person, CPA, etc. “It will cost considerably more on the back end if it isn’t done correctly the first time,” said O’Kelly. “Think of it as insurance.”

Make sure your documents are in order. “Franchising is highly regulated by the Federal Trade Commission and there are very specific legal documents that need to be created/followed in order to franchise,” noted O’Kelly. In addition, she said, there are many states that have specific requirements and legal documents. “Engage a lawyer and a fairly large budget—more than $100,000 to get your legal document in order.”

Document processes thoroughly. “It’s critical to have a very detailed operations manual to make sure franchisees follow your policies and procedures exactly,” said O’Kelly. “Your brand reputation is at stake.” In addition, whether included in the operations manual or a separate document, create a training program that prepares franchisees for all aspects of your business, she advised.

Choose franchisees carefully. “Don’t just accept anyone and everyone who wants to buy a franchise,” O’Kelly cautioned. “Vet the applicants for the entrepreneurial qualities and business acumen needed to represent the brand well and provide long-term growth for your company. Getting the right franchisee is much more important than trying to hit a target number.”

Be flexible. “When starting a franchise program, you might find that some things don’t work as planned,” said O’Kelly. “Listen to your franchisees and make changes when appropriate.”

Lin Grensing-Pophal, SPHR, is a Wisconsin-based business journalist with HR consulting experience in employee communication, training and management issues.

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